Earnings call transcript: Rana Gruber Q4 2024 sees revenue drop

Rana Gruber AS reported a notable decline in revenue and earnings for Q4 2024, with revenue reaching 443 million NOK, down from the previous year. The adjusted earnings per share (EPS) also fell to 2.57 NOK from 5.8 NOK. The stock reacted negatively, dropping 0.6 NOK or 0.81% to close at 73.1 NOK, reflecting investor concerns over the company’s financial performance. According to InvestingPro analysis, the company maintains a GOOD financial health score, with particularly strong profitability metrics including a 55% return on equity.

Key Takeaways

• Revenue decreased significantly compared to the previous year.
• EPS fell sharply, indicating a challenging quarter.
• Stock price dropped slightly, reflecting cautious investor sentiment.
• Increased magnetite production could stabilize future revenue.
• Strong balance sheet and cost optimization initiatives noted.

Company Performance

Rana Gruber’s Q4 2024 performance showed a decline in key financial metrics compared to the previous year. Revenue fell to 443 million NOK, and adjusted net profit also decreased to 95.2 million NOK. Despite operational improvements, such as increased magnetite production, the company faced challenges due to lower iron ore prices and potential US tariffs.

Financial Highlights

• Revenue: 443 million NOK (down from previous year)
• Adjusted EPS: 2.57 NOK (down from 5.8 NOK last year)
• EBITDA: 147 million NOK (down from 358.5 million NOK)
• Dividend: 1.8 NOK per share
• Cash Flow from Operations: 85 million NOK positive

Market Reaction

The stock price of Rana Gruber fell by 0.6 NOK, a decline of 0.81%, following the earnings announcement. This movement suggests a cautious market response, likely driven by the significant drop in financial performance compared to last year. The stock remains closer to its 52-week low, indicating ongoing investor concerns. InvestingPro data shows the stock generally trades with low price volatility, with a beta of 0.95, making it relatively stable compared to the broader market.

Outlook & Guidance

The company is optimistic about increasing magnetite production volumes, which could lead to more stable revenue streams. Rana Gruber is targeting a cash cost of USD 50-55 per tonne, having achieved USD 46 per tonne in Q4. The production capacity is expected to reach 1.8-1.85 million tons per year.

Executive Commentary

CEO Gunnar Moo highlighted the increase in magnetite volumes in 2024 as a significant achievement. CFO Arren Hegen expressed confidence in maintaining cost targets, while emphasizing the importance of safety and sustainability in operations.

Risks and Challenges

• Declining iron ore prices could continue to impact revenue.
• Potential US tariffs pose a risk to market access.
• The discontinuation of the Colorana product line may affect product diversification.
• Exchange rate fluctuations could influence cash cost sensitivity.
• Ongoing global economic uncertainties may affect demand.

Q&A

During the earnings call, analysts focused on the potential impact of US tariffs and the company’s strategy for managing cash cost sensitivity to foreign exchange rates. The transition from hematite to magnetite production was also discussed, along with the decision to discontinue the Colorana product line by the end of 2025.

Full transcript - Rana Gruber AS (RANA) Q4 2024:

Gunnar Moo, CEO, Rannergueber: Welcome to this presentation of Rannergueber’s results for the fourth quarter and full year of 2024. My name is Gunnar Moo and I’m the CEO at Rannergueber. With me today is our CFO, Arren Hegen. We will now take you through our operational and financial performance and you are welcome to send us questions during our presentation by using the Q and A feature. Questions will be answered at the end of the session.

Rande Gruber maintained strong production throughout the year, achieving a new record for the second consecutive year. This success highlights our resource potential and is a statement to our a testament to our skilled team. At our Capital Markets Day, we published our long term cash cost target of USD 50 to USD 55. For the fourth quarter, we achieved a cost of USD 46, thereby positioning it under Gubel below our target. Our cash costs are subject to seasonal variations due to fluctuations in the production both at the mine and in the processing plant.

Our CFO will provide a detailed briefing on these variations later in the presentation At the January, I had a very productive meeting with the Sultan Reindeer District We reached an agreement on the framework for future operations in the Storfersche and Ertfeld areas. Coexistence is essential to achieving mutual understanding and sustainable solutions. Therefore, the production at the Stenxunshan Open Pits is nearing commencement and we are finalizing the pit design and planning a seamless transition from the earth filled open pit operations to new site with estimated production start later this year. Returning capital to our shareholders has been a central part of strategy since we went public. After two quarters, we are now returning back to 70% of our adjusted net profit and paying NOK 1.8 in dividends per share for the fourth quarter.

Since going public, we have returned over NOK 1,400,000,000.0 to our shareholders. Our most valuable asset is our people and their safety should always be our top priority. In the fourth quarter, we had no injuries resulting in absences from work. For the full year of 2024, we recorded on one injury that led to a short term absence. These incidents provide important lessons that we continuously strive to implement in our operations.

In January 2025, the results from TSM towards sustainable mining reporting became publicly available in Norway. This is an important milestone for transparency and sustainability in the mining industry. At Randerguebe, we are committed to high standards and in 2024, we reported on all available TSM protocols. As a result, we are among the few companies in Norway to achieve a top tier rating, scoring between A and AAA. This reflects our dedication to responsible mining practices and continuous improvement in environmental and social performance.

2024 has been a notable year for Randegueber with a significant increase in magnetite volumes and total production reaching new highs. Fourth quarter was another strong production quarter, both related to hematite and magnetite. Going forward, we expect the magnetite production will increase as we entering into more magnetite rich areas and production begins in Stenson and Kjell. This will eventually reduce the hematite production, but at the same time it will also reduce future volatility in our revenues. Our Colorana products have been a part of the Rane Gurbis brand for decades.

However, the market has declined, profitability has weakened in recent years and the production line is approaching the end of its life cycle. Future production will necessitate increased investments. To make room for new equipment supporting our high grade transformation, we will stop production of the Kholera products at the end of twenty twenty five. We aim to offer employees currently working on the Kholera production line positions in other parts of Rana Gubet in line with the company’s expected workforce turnover. Now over to our CFO, Alan Heijen, who will give you the financials.

Arren Hegen, CFO, Rannergueber: Thank you. Good night. Starting off with the revenue side of the p and l. As seen in the graph to the right, revenues for the fourth quarter increased from previous quarter and ended at 443,000,000 NOK. Compared to last year’s fourth quarter, however, revenue was impacted by lower iron ore prices.

This has partly been offset by increased sales volumes, lower freight costs, and a more favorable foreign exchange position. From the graph in the middle, you can see that realized prices for both magnetite and hematite has been stable for the last quarters. And as Gunnar mentioned, we still expect magnetite sales to increase throughout the year due to the strategic uplift that we have done in annual production volumes on that product. Going over to the cost side, on our capital markets stay in November, we established a cost target of staying between 50 to $55 per tonne of iron ore produced. For the fourth quarter, we are glad to report that we are below this target, ending at $5.21 NUC per ton or approximately $46 per ton, well below the target of 50 to $55 per ton.

Beyond the strengthening of the US dollar, the underlying cost structure in NOCC was impacted by several cost optimization initiatives, as well as factors such as lower waste rock removal in the open pits, lower energy costs both on electricity and diesel, and savings on the use of external resources. Going forward, we do expect some seasonal variations in some of our cost structure, but we remain confident in delivering a ring on our cost target range. A quick note to some of the figures shown here. EBITDA decreased to 147,000,000 NOK from 358,500,000.0 NOK last year, mainly due to the reduction in revenue as we’ve seen. In the fourth quarter, the pretax profit was adjusted with positive 48,800,000.0 NOK related to unrealized changes in the company’s hedging portfolio, resulting in an adjusted net profit of 95,200,000.0 NOK, down from $215,000,000 NOK last year.

Please note that there has been a change in the APM related to how we adjust the hedging portfolio related to freight and foreign exchange. And you can see more details about this in the interim report that we have published today. This gives us an adjusted EPS of 2.57 compared to 5.8 knock last year. And by following our dividend policy, the board decided to pay out 1.8 knock in dividends per share for the last quarter of twenty twenty four. Moving over to cash flow.

The total net cash flow from operations in the fourth quarter amounted to positive 85,000,000. Included in this is a tax payment of 97,000,000 NOK. CapEx for the period was 38,000,000, 26,400,000.0 of this was development capex related to project then again mainly to the new mine level, but also smaller investments in the FA65 project and the increased magnetite production project. 11,500,000.0 was related to scheduled investments in machines, buildings, etc, things that we typically classify as maintenance capex. Of financial activities, 54,000,000 was payout of dividends for the third quarter and 11,000,000 was payment of principal portions of our lease liabilities.

All in all, this gives us a negative change of 17,000,000 NOK for the fourth quarter. As normally, let’s look at our L10D financial review with a short look at our financial position. We still consider our financial position to be solid and strong and no big changes on our balance sheet on the last quarter of twenty four. After the dividend distributions for the third quarter, our equity ratio was 56% and by the end of the year we had a total cash holding of 45,000,000 NOK. And that concludes the financial section and I’ll now leave the word over to you, Gennai, for your final takeaways.

Gunnar Moo, CEO, Rannergueber: Thank you, Alain. To sum up the end of twenty twenty four, we delivered strong production figures and increasing magnetite volumes securing a more stable cash flow going forward. Q4 showed a solid delivery on cash costs of US46 dollars per tonne, well below target between US50 dollars and US55 dollars We have a strong balance sheet, solid partners and a competent organization to handle volatile markets. We are also on track to deliver iron ore concentrate of 65% and increased magnetite production. Now we have had 16 consecutive quarters of dividend payers returning to our 70% goal on the distribution policy.

With that we conclude this presentation and move over to the Q and A session. Thank you.

Moderator/Analyst: Thank you, Aaron. And, you know, for the moment, we haven’t received any questions. So I will give the audience time to write some questions. And before that I could start with a couple of questions from our side. The first questions I will ask to you, Gunai.

What is your thoughts about The U. S. And the tariffs ongoing?

Gunnar Moo, CEO, Rannergueber: Well, this is of course extremely difficult to say. First of all, the tariffs that has will be implemented in March regarding steel and aluminum is at the moment difficult to say if this regards also the raw materials to the steel market. But we think that the activity in China is much more important than what happens in US, between US and Europe. So we’re not that anxious and we are also quite, we do believe that an Asian government will find ways in order to sort out the wake of doing business within EU and Norway. So we’re not that concerned.

But of course, we are following everything that happens very closely. But at the moment, very difficult to say.

Moderator/Analyst: Thank you. The next question, I’ll take it to Aaron. Going forward, our cash cost, what could you say about that?

Arren Hegen, CFO, Rannergueber: I would say that this quarter proves that we are on the right path of sort of like reducing our cash cost. We’re confident that we will stay within the target range that we have communicated in November. This quarter some of the change was related to typically stuff like lower waste cost, waste rock removal, lower electricity prices and diesel prices. Some of this will go forth in 2025 as well, of course, but a lot of the reduction has been due to optimizations that were done internally, organizational, and a lot more focus on key tasks internally. So we’re quite confident that a lot of the reduction that we see has been made due to internal focus and initiatives, so positive going ahead.

If I won’t promise that we will sort of, like, hit hit below our target each quarter, but confident that we will secure a cash cost within the target for for the next year. Thank you.

Moderator/Analyst: I have two questions that’s it’s more or less in the same region and I think maybe Aaron could start on that at least. The first question is, I think it was mentioned that Magnetite may increase revenue volatility. And another question is, how much reduction in hematite would it be because of the increased magnetite production?

Arren Hegen, CFO, Rannergueber: Yeah. I guess I can answer both of them. The minutite has a different structure when it comes to pricing. It’s more bilateral agreements that this or, like, supporting the minutite sales, and it’s also sold to a different market, it’s not going to the steel market. That’s the reason for a more stable price expectations when magnetite volumes takes over more of the sales compared to historical figures.

And when it comes to the mix between, magnetite and hematite production, I would say the easy answer is that our production capacity is roughly 1.8, one point eight five million tons per year, and there is a one to one mix between the increased magnetite production and reduction in hematite as of now, but as we have communicated a lot of times we are doing optimizations both in the hematite production line and in the mine site, so we are also looking at how we can optimize this going forward of course.

Moderator/Analyst: Perfect. The next questions I think Gunnar could take it. How many shipments did you do in total to China in 2024 and what are the expectations to deliver to the Chinese markets versus Europe in 2025?

Gunnar Moo, CEO, Rannergueber: Well, that’s not last year I think we sent, I’m not sure, and maybe Alan could, but I think it was three vessels to China. This year, we are prepared to to continue to sell some vessels to China probably not more than last year but it’s a little bit early to say. We had one vessel going to China in the first quarter. There will not be any more this quarter so we have to look ahead to see what happens in Europe. But at the moment, it looks like we’ll be approximately the same volume this year as last year to China.

Moderator/Analyst: Yes. Going back to the cash cost, Aran, could you say something about how FX sensitive our cash cost target is. Is it more relevant to think of it as a USD or a NOK target?

Arren Hegen, CFO, Rannergueber: The reason for communicating a USD target is related to that the whole revenue side is mainly related to the USD target, but eventually there is a conversion of course because most of our cash cost base is in Norwegian kroners, So obviously when you sort of calculated over to the USD side, but since the foreign exchange will come into play, so I would say the rationale of linking it to the, USD is that that also links it to the revenue side of the of the company. So if one moves, the other one moves with it. But, obviously, on a day to day basis, and working with the organization, a nook target internally is obviously key to be able to deliver on the dollar target.

Moderator/Analyst: Thank you. The last questions I have here now is, going about Kolarana. I think Gino could answer that. Will the revenue contribution of approximately 14,000,000 per quarter from KORONA be substituted with anything?

Gunnar Moo, CEO, Rannergueber: Well, as communicated in this presentation, the margin for the colorana line hasn’t been there at all the last period so that the main reason for for closing down the operation is that we don’t we lose money on the production and because of that we we decided to focus on the main production of hematite and magnetite which is our main focus no one will be in the future of high grade so it has been a loss So on the revenue side, there will be will there be a replacement of increased revenue on the magnetite side because the magnetite production will will increase when we close down the humid the kolera line.

Moderator/Analyst: Thank you. And back to cash cost, Arran. You said that the majority of the costs are in Norwegian krones. Could you specify approximately how much in percent

Arren Hegen, CFO, Rannergueber: oh, let’s see. The the the two sort of like main, obviously, a lot of the all of the input will eventually come from abroad, so- but on a short period I would say that electricity is directly linked to euros and our diesel consumption is directly linked to US dollars. So say that roughly roughly seven to 10% is directly linked to foreign exchange on a monthly basis and the rest, so 90 to 93%, is on a short term basis linked to Norwegian kroners, but if you expand that to a twelve month period then wear and tear parts would obviously also could fluctuate. So it depends on whether you look at just a month or on a year and the changes. But most of it on short term is directly linked to NUK.

Moderator/Analyst: Thank you. That looks like all the questions for today. And of course if you have any other questions you’re more than welcome to contact us by email or by phone and we’ll try to answer them as fast and good as possible. So with that I will thank you all for today and looking forward to see you again in May.

Arren Hegen, CFO, Rannergueber: Thank you. Bye everyone. Thank you.

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